Eaton: Wiring the Future (and Hoping It Doesn’t Blow)

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The wizards – or, as they’re known in the mundane world, ‘hyperscalers’ like Microsoft, Meta Platforms, and Amazon – are building. Not castles, exactly, but vast halls of humming silicon, dedicated to the pursuit of Artificial Intelligence. They’re throwing gold about like it’s going out of style – a good $500 billion this year, according to the scribes at Goldman Sachs. It’s a bit like commissioning a cathedral, only instead of stained glass, you get blinking lights and the faint scent of ozone. And where there’s a building boom, there’s opportunity. Someone has to wire the thing, after all.

Enter Eaton. Not a name that trips lightly off the tongue, perhaps, but a company that’s quietly positioning itself as the… well, let’s call them the ‘electrical plumbers’ of the AI revolution. They’re not building the brains, they’re ensuring the brains don’t fry.1 They’ve been subtly shifting their portfolio, realizing that the future isn’t about making slightly better toasters, but about keeping the digital gods from throwing a tantrum. And right now, the digital gods are hungry for power.

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Eaton: Keeping the Lights On (and the Servers Humming)

Eaton doesn’t make the flashy bits. They make the switchgears, the transformers, the power distribution units – the unglamorous but utterly vital components that ensure everything…works. They also dabble in uninterruptible power supplies – crucial, because even digital deities are grumpy when the power goes out. And now, they’re moving into liquid cooling.2 Because, as anyone who’s ever tried to run a marathon in a wool coat knows, things get awfully warm when you’re pushing the limits.

They recently announced their intention to acquire Boyd Thermal, a move that’s akin to a blacksmith suddenly deciding he needs to master the art of refrigeration. It gives them a foothold in the liquid cooling business, which, according to Eaton’s management, is set to grow at a rather brisk 35% annual rate through 2028. Why? Because AI chips aren’t exactly known for their energy efficiency. Traditional server racks used to consume a sensible 10-15 kilowatts. Modern AI racks? 80 to 100. It’s like replacing a lightbulb with a small sun.

Eaton is, unsurprisingly, seeing robust demand. Orders are outpacing historical averages, and they’re reporting a surge in ‘megaprojects’ – those delightfully extravagant undertakings valued at over $1 billion. Data centers accounted for nearly half of that total in the last quarter. Their data center orders increased 70% year-over-year, with sales up 40%. The backlog for their Electrical America’s segment has swelled to $12 billion. That’s a lot of wires. And fuses.

A Pick-and-Shovel Play in the Age of Algorithms

Eaton currently trades at 26.4 times this year’s projected earnings. It’s not cheap, but then again, neither is keeping the digital world from collapsing. There’s a risk, of course. If the hyperscalers decide to scale back on their spending, Eaton’s earnings could take a hit. But, so far, there are no signs of that happening. The wizards seem determined to build their towers, and Eaton is there, diligently laying the electrical foundations.

The data center buildout is a multi-year undertaking, which should provide a tailwind for Eaton’s business. For investors looking to get in on the AI boom and seeking a ‘pick-and-shovel’ play – a company that profits from the efforts of others – Eaton is a solid choice. Just remember, even the most reliable infrastructure can occasionally…spark.3

1

And let’s be honest, the digital world is already quite fragile. A good surge protector is a form of preventative diplomacy.

2

Liquid cooling. It’s basically turning server racks into oversized radiators. The future is…damp.

3

A well-placed fire extinguisher is also highly recommended. One should always prepare for the unexpected. Especially when dealing with large amounts of electricity and increasingly intelligent machines.

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2026-02-05 15:04